THE MINING INDUSTRY AND ITS POTENTIAL TO SAVE THE PHILIPPINES FROM THE GLOBAL ECONOMIC CRISIS by Ric Fian | July 29, 2009

Environment and Natural Resources Secretary Lito Atienza (left photo) expresses optimism that the country’s mining industry will weather the current global financial crisis during the Asia Mining Congress 2009 held in Singapore. In a keynote address, Atienza told leading mining leaders and investors that the industry’s “fundamentals are sound like high geological prospectivity supported by a globally comparable mining law that promotes responsible mining and the commitment to improve the overall investment competitiveness.” (Photos by Rubelyn Alcantara – Intercom UK Ltd.).

Looking for a way to shield the country from the impact of the still-raging world financial crisis? The solution may lie under the ground. Geologists from the Mines and Geosciences Bureau (MGB) estimate that 9 million hectares in the country have high potential for copper, gold, nickel and chromite, which may amount to millions metric tons of mineral deposits which could fetch millions of dollars in the world market.

Environment and Natural Resources Secretary Lito Atienza confirmed the MGB study, saying the riches of the country’s mineral deposits and other natural resources is now recognized all over the world. “God provided Filipinos with all these natural wealth, making us more fortunate than the people of other countries. No Filipino will ever go hungry if we only develop, manage and utilize our mineral resources sustainably and responsibly. The country’s mineral resources can provide economic development that will lift many Filipinos from poverty,” he said.

He added that a vibrant mineral sector may even turn out to be the country’s ticket to economic modernization and an effective tool in poverty reduction.

Assessment conducted by the MGB shows that mineralized areas in the country cover 9 million hectares, or about 30 percent of the country’s total land area. At present, less than half a million hectares are under exploration or development. This means that 8.5 million hectares or 94.4 percent of the country’s mineralized areas have yet to be developed.

MGB data shows that the country contains an estimated 83 billion metric tons of mineral ore deposits. These deposits include more than 14 billion metric tons of metallic ore and more than 69 billion metric tons of non-metallic ore that can be found more abundant in the Sierra Madre mountain range in Luzon and in the Mindanao region. In Mindanao , the area from Davao to Butuan City is believed to be the richest mineralized area in the country.

Other areas believed to be rich with gold and copper deposits are Mt. Diwalwal in Compostela Valley in Central Mindanao , Benguet in Northern Luzon and Rapu Rapu island in Bicol. The provinces of Mindoro , Benguet, Zambales, Nueva Vizcaya, Cebu and Leyte also have rich mineral deposits.

In gold alone, the country has an estimated ore reserve of about four billion metric tons. Copper ore deposits also are estimated to reach more than 7.9 billion metric tons and 815.3 million metric tons of nickel ore making the Philippines in world ranking 3 rd for gold, 4 th for copper and 5 th for nickel.

Mining Revitalization

In the 1980s, the country’s mining industry experienced dismal performance due to closure, suspension and scaling down of major mining operations caused by low prices of metals in the world market and high labor cost in mining operations.

The contribution of the mining sector — which still provides direct employment to 112,000 people (as of 2003) — has dwindled from a high of 25 percent of total foreign exchange earnings in the 1980s to a mere 1.5 percent in 2003 due to the closure, suspension and scaling down of major mining operations. The number of active mines in the country has fallen from 58 in 1981 to 27 in 1997 and down to 12 (two large-scale mines — Lepanto gold mine and Philex Copper Mine — and 10 medium-scale mines) in 2003.

The resurgence of prices of metals on the world market has pushed up the total value of mineral production. The MGB also said that the increased demand of China for metals and the volatile political situation in the Middle East , particularly in Iraq , may have triggered the substantial increase in the prices of gold, silver, copper and nickel in the international market.

In 2003 President Gloria Macapagal Arroyo launched the government’s Philippine Mining Industry Revitalization Program anchored on the principle of sustainable development and promotion of responsible mining. The implementation of the program shifted to high gear after the Supreme Court reaffirmed the constitutionality of the Philippine Mining Act of 1995 on December 6, 2004 .

The Supreme Court’s reaffirmation paved the way for the government to declare that the mining industry is now “open for business”. Allowing foreign investors to tap into the country’s mineral wealth, she ordered the Department of Environment and Natural Resources (DENR) to enforce all safeguards on the mining industry.

23 Priority Mining Projects

Efforts to jump-start the Philippine mining industry have since gone full blast. Government policies are now directed to removing any remaining stumbling blocks to investment into this sector.

The government has identified 23 promising (priority) mining projects capable of generating $6.2 billion investments and $6.8 billion revenues for a six-year period.

The government has also 25 project classified as first-tier priority mineral development projects. Out of the 25, seven are in the construction and development stage, nine in the feasibility or financing stage and another nine in the advanced exploration stage.

DENR 2008 records show that total mining investments coming from 40 processing and 23 mining exploration projects in the country during the period 2004 until the first quarter of 2008 amounted to a total of US$1.45 billion . The DENR records also indicate that another additional potential investments amounting to US$9 billion are expected to shore up mining investments to a total of US$10 billion up by 2011.

Social Development

The minerals industry plays an important role in the country’s social development. It helps improve the lives of the people and mining communities. Even still at the exploration or development phase, the country already feels the positive impact of local and indirect taxes, direct and indirect employment, social infrastructures, environmental improvements and technological developments. Mining companies provide social developments in the communities where they operate. They build roads, bridges, community schools, hospitals, churches and houses for their employees and families. They also provide electricity and livelihood projects to mining communities. The development of mining communities is pursuant to the social provision of the Philippine Mining Act of 1995 (RA 7942) requiring the company to allocate not less than 90% of its 1% direct mining and milling costs to finance its social development and management program (SDMP).

Economic Contribution

In the midst of the on-going economic crisis, the government looks at the mining sector as one of the brighter spots in its efforts to raise revenues to fight poverty. DENR 2007 records show that the country’s mineral industry posted P97.41 billion in mining gross production output. Mineral exports during 2007 also reached US$2.37 billion, with the government getting P2.1 billion in taxes and fees. Mining also contributed P31.8 billion to the country’s GDP — defined as the sum of all goods and services produced in the country in a particular period — and gave employment to 139,000 individuals.
With the upswing of the investments in the mineral industry seen in the total of US$262- million mining investments posted in the first semester of 2008, the government expects investments in the mining sector to reach $12.6 billion by 2013.

Former Manila Assemblyman, General Manager of the National Housing Authority, Manila Vice-Mayor for 6 years, Mayor of Manila for 9 years, and Secretary of the Department of Environment and Natural Resources